UN official: US must cut back on biofuels

A senior United Nations official is calling on the United States to suspend biofuels production to combat the effects of the country-wide drought, potentially giving momentum to those on Capitol Hill fighting for the same result.

The drought has inflicted enough damage on U.S. corn supplies to threaten international food supplies, U.N. Food and Agriculture Organization Director General José Graziano da Silva wrote in the Financial Times (subscription required).

“An immediate, temporary suspension of that mandate would give some respite to the market and allow more of the crop to be channeled towards food and feed uses,” he wrote in the column published late Thursday.

The U.N. official’s column arrives as the U.S. government slashes estimates of corn production this year. The Agriculture Department, in a forecast Friday, predicted that national production will be 10.8 billion bushels in 2012, a 13 percent drop from 2011 and the lowest output since 2006, according to news reports.

With 40 percent of U.S. corn acreage dedicated to biofuels, da Silva said too little is left to survive some of the price shocks the drought has inflicted on the crop.

“The situation reminds us that even the most advanced agricultural systems are subject to the vagaries of the weather, leading to volatility in supplies and prices, not just on domestic markets, but also internationally,” he said.

Whether the U.N.’s weight will have any effect is unclear, though lawmakers and livestock producers who have used the same logic that da Silva espoused to cut back on corn biofuel will likely seize on the comments.

Lawmakers and their rancher allies have tried in recent weeks to get the Environmental Protection Agency (EPA) to waive corn ethanol production requirements as a form of drought relief. They say preserving the quota is driving up corn prices by locking up supplies that could go to livestock feed.

The EPA can waive all or part of the renewable fuel standard (RFS), which requires refiners to blend 13.2 billion gallons of corn ethanol into transportation fuel this year. The RFS must be shown to cause severe economic or environmental harm to satisfy the waiver conditions, but meeting those metrics has proven difficult in the past.

But the biofuels industry claims the RFS has little impact on corn prices, even with the drought. They said ethanol producers already have curtailed production in response to high corn prices. They also contend enough corn ethanol stockpiles and credits, used instead of purchasing actual gallons of corn ethanol, exist to mitigate the supply issues.

Additionally, the biofuels industry noted the EPA can only waive the RFS if refiners have trouble meeting their production targets. Industry says that will not happen this year.


—This post was updated at 10:05 a.m.

Ben Geman contributed



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